Red Sea crisis, transport costs quadrupled in the last twelve months

The alarm in the new report of Boston Consulting Group: a rise in shipping rates up to seven times compared to previous levels

Milan – The Red Sea crisis has hit global trade hard, quadrupling transport costs compared to October 2023. The Houthi attacks along the Bab el-Mandeb strait, where 12% of world trade and 40% of goods pass between Asia and Europe, have made this route impassable, forcing companies to divert ships through the Cape of Good Hope and thus increasing transit times up to 10 days. The new report “What’s Next for Container Shipping in the Red Sea Crisis“, published by Boston Consulting Group, updates the scenarios outlined in March.

“The future of trade routes between Asia and Europe – explains Gabriele Ferri of Boston Consulting – depends on the industry’s ability to adopt more flexible and adaptive approaches, diversifying transport options, Investing in new technologies to enable dynamic route and price optimisation and improve overall efficiency. At the same time, for producers, it is necessary to develop long-term solutions such as relocation (total or partial) of production and greater integration between maritime and air transport in order to ensure continuity of operations”.

The March report had highlighted the risks of an escalation of conflict in the region, stressing that maritime traffic across the Red Sea would be severely compromised. Western forces, while intervening to limit the damage of the Houthi attacks, failed to stop them, confirming the scenario in which the main trade routes would be diverted towards the Cape of Good Hope. This has led to a 30% increase in transport times and up to seven times higher shipping rates than before the crisis.

The new document does not foresee any rapid improvements, on the contrary, the crisis could continue until 2026, with further impacts on global trade. The ports along the west coast of Saudi Arabia, such as Jeddah and King Abdullah Port, are among the most affected, with a drastic reduction in transhipment activities. By contrast, some alternative ports, such as Dubai, Mundra in India, and Colombo in Sri Lanka, have benefited from increased maritime traffic, but the pressure on infrastructure remains high.

The latest estimates, according to Boston Consulting Group, confirm that the solutions adopted by shipping companies, such as increasing capacity and speeding up ships, are now exhausted. As predicted in the March report, traffic across the Red Sea has fallen sharply, while transport rates have risen dramatically. Companies face unsustainable operating costs and longer lead times, compromising the continuity of global supply chains.

SHIP MAG SOURCE ARTICLE OF 10/23/2024